The company said that the upfront investment required is now at a ‘significant variance’ to the original proposal and the economics of the deal have therefore changed materially. Providence has advised Petronas accordingly.
An option, exercised in September 2009 with an initial cash deposit of $3.8m, gave Providence?s wholly owned subsidiary, Eirgas, the right to acquire up to a 40% interest in the 100% operated Kinsale Head Area (comprising the Kinsale Head, South West Kinsale and Ballycotton gas fields) and up to a 40% interest in the 86.5% operated adjacent producing Seven Heads gas field (collectively referred to as the ‘Kinsale Head Area assets’). The initial deposit will now be refunded in full, the company said.
Under the terms of the Option Agreement, Eirgas was to purchase its stake in the Kinsale Head Area assets on the same pro-rata terms by which Petronas acquired its stake from Marathon Oil in April 2009.
That transaction had a total value of $180m, with an effective date of January 1, 2008. The closing of this transaction was subject to regulatory approval with its financing being met from cash resources and banking facilities.
Tony O’Reilly, chief executive of Providence said: “Due to a combination of updated financial data and increased funding requirements, it became clear that the transaction no longer represented the same opportunity for Providence shareholders.
“Whilst the long term economics of gas storage are compelling, and Kinsale represents a unique world class asset, the short term marked erosion in gas prices, combined with a different planned capital structure going forward, led us to withdraw.”
